Salmon: Analysts expect 16%- 26% average price hike for 2013

January 30, 2013, 7:15 am

Farmed Atlantic salmon prices out of Norway should average NOK 30.5 to NOK 33 ($5.55 – $6) per kilo in 2013, according to estimates from five Norwegian seafood analysts canvassed by Undercurrent News.

That would mean an increase of around 16-26% from last year’s average of NOK 26.2 ($4.76).

All five analysts had even higher estimates for 2014, ranging from NOK 32.5 to NOK 34.

In a report from Jan. 29, Swedbank said it had lifted its price estimate from NOK 31 to NOK 33 for both 2013 and 2014 in light of a tight market balance, with a very low supply growth ahead, and a stronger than expected demand.

“The tight market balance has materialized and supported by key statistics on the supply side and the demand side, we are increasingly confident that the market will clear at a higher price level than previously anticipated,” Swedbank analyst Henning Steffenrud wrote in the report.

The lowest estimates came from SpareBank 1 Markets’s senior equity analyst Geir Kristiansen.

Kristiansen forecasts average prices of NOK 30.5 in 2013, and NOK 32.5 in 2014.

In a nutshell, this reflects his belief that Chilean prices will keep Europe in check, Kristiansen said. “If prices become too high in the first half of the year, I fear a stronger drop in the second half as a result of a negative market reaction when the price hike hits the shelves in Europe,” he told Undercurrent.

Analyst forecasts, average salmon prices from Norway

NOK per kilo

 

2013

2014

Sparebank

30.5

32.5

Nordea

31

34

Norne

32

34

Pareto

32.75

33.5

Swedbank

33

33

Consensus

31.85

33.4

Demand impact?

Some buyers Undercurrent has spoken to have expressed their fear that prices are once again increasing too fast, by too much, potentially damaging the market before heading to a price crash as seen in 2010, although to a lesser extent.

According to Kristiansen, demand could be harmed if prices remain in the mid-30s (around NOK 35) or higher over a longer period, for example throughout the first quarter of the year.

However, a repeat of 2010 is “very unlikely” to happen, said Felix Heinrich, of Pareto Securities.

“It’s very unlikely since Norway’s production growth potential is not even close 2010 levels,” Heinrich said.

“Higher retail prices could hit demand and reduce prices, but given that the contract level is still low we believe that any correction will be short term.”

According to Heinrich, the share of contracts has been increasing on the higher spot prices, but “it is still low in absolute terms”.

That said, prices are historically always higher in the first half of the year than in the second half. Heinrich expects prices to average NOK 34 for the first half of the year, and NOK 31 in the second half.

Steffenrud said average prices of NOK 33 should not damage demand.

“According to several industry sources, including the world’s leading salmon processor, a spot price of NOK 30-35 per kilo should not have any substantial negative impact on overall demand,” he wrote in the report.

While lower prices and promotions were important in driving demand growth in 2012, “there is no doubt that the underlying demand for salmon is strong,” Steffenrud said.

“Based on the historical relationship between supply growth and prices, indicating a long-term underlying demand growth of 6-7%, it is impressive that the 18% supply growth from Norway last year was absorbed at an average price of NOK 26.2, about NOK 1.50-2 above production costs per kilo.”

The low prices and promotions also helped to expand salmon’s reach, he added.

For Canada, Steffenrud expects prices to go up to and average of $2.50 per pound in 2013, and $2.70 in 2014, for whole salmon of 8-10 pounds, FOB Seattle.

For Chilean fillets of 2-3 pounds, FOB Miami, he expects prices to average $3.55 in 2013, and $3.90 the following year.

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